Recommendation 2012-R-02 of October 12, 2012, on the marketing of term deposits, as amended

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Online publication on the ACPR website on 19/12/2019 Recommendation 2012-R-02 of October 12, 2012 on the marketing of term deposits, amended on December 6, 2019

1 Context and reminder of the legislative and regulatory framework A term deposit – also known as a time deposit – is an account on which a single blocked deposit is placed, remunerated at a rate and for a period that cannot be less than one month, fixed in the contract, and repayable in a single lump sum, in full, at the expiration of this period, except for possible provisions regarding the disposal of funds before maturity specified in the contract. A distinct term deposit account must be opened for each time deposit operation, and this account can only record the entry for the deposit of funds to be blocked, the entries for account closure, and the entry for account balance at the contractually agreed maturity.

Term deposits are covered by the deposit guarantee mechanism up to the current limit. The rules governing them (remuneration, duration, inclusion or not of a termination clause with or without penalties payable by the depositor) fall largely under contractual freedom and, consequently, the agreement concluded between the bank and the depositor. The following texts are specifically applicable to them:
– the general decision No. 69-02 of May 8, 1969 of the National Credit Council regarding the conditions for the receipt of funds by banks, as amended; – the general decision No. 69-03 of May 8, 1969 of the National Credit Council regarding the conditions for the receipt of funds by financial institutions, as amended; – Regulation No. 86-13 of May 14, 1986 regarding the remuneration of funds received by credit institutions, as amended.

In the context of its monitoring action on advertising and new products, the ACPR has been able to observe the extreme heterogeneity of term deposit offers proposed to retail customers. Thus, several typologies of term deposits can be identified with regard to market practices, some of which may combine several of their characteristics.

o The simplest term deposit offers propose an investment for a duration, for an amount and a fixed rate known at the time of the offer. o Other offers propose a progressive rate where the remuneration, determined at subscription, increases during the duration of the investment. o Some variable-rate term deposits offer a yield indexed on a market rate or a reference index. o In an initial framework contract, the subscriber commits to opening several term deposits with sometimes different durations and operating modalities. o The term deposit is a constituent element of a product composed of other savings products or financial services with which it is linked through payments.

The characteristics of these different offers are not always clearly explained in advertising and commercial documents. Thus, some documents have created relative confusion between term deposits and savings accounts, or even in some cases with life insurance contracts. Depending on the terms of the term deposit, the operation and effective remuneration are sometimes difficult to grasp.

Some advertisements highlight the availability of funds at any time, obscuring the minimum opening duration of the term deposit, which cannot be less than one month, and any penalties in case of early termination.

2 Scope of the recommendation
This recommendation advocates good practices regarding the marketing of term deposits intended for natural persons acting for non-professional purposes.
It addresses credit institutions, including when these institutions operate in France under the freedom to provide services or freedom of establishment, as well as intermediaries in banking operations and payment services, hereinafter collectively referred to as "the entities".

3 Recommendation
With the objective of greater transparency in the marketing, management, and closure of term deposits, the ACPR recommends to the entities, in accordance with the provisions of Articles L. 612-1 II 3° and L. 612-29-1 of the Monetary and Financial Code, the following good practices:

3.1 On communications of an advertising nature:
To ensure that advertising communications intended for depositors provide a balanced presentation of the product and do not favor the most advantageous characteristics to the detriment of less favorable product conditions:

3.1.1 In all communications of an advertising nature:
3.1.1.1 To mention the "term" nature of the product.
3.1.1.2 To ensure that the presentation, and in particular the commercial names used, are not likely to mislead regarding the nature of term deposits, nor to cause confusion with another savings product or financial service.
3.1.1.3 If the argumentation concerns the availability of funds, to indicate the consequences of an early withdrawal when it is possible.
3.1.1.4 To ensure that the information contained in advertising communications is clear, legible, and understandable.

3.1.2 For advertising communications presenting elements on the remuneration of the product:
3.1.2.1 To mention the duration of the contract.
3.1.2.2 To specify, if applicable, that early withdrawal of funds before the contract maturity date is not authorized.
3.1.2.3 If the interest rate appears in the advertisement, to express it in the form of a gross annual actuarial yield rate, before social and tax deductions, and to indicate in a legible manner and adjacent to the rate its nature (fixed, progressive, or variable) as well as its gross character.
3.1.2.4 To mention this annual actuarial yield rate, calculated over the total duration of the investment, in the main body of the advertising text and in a font size larger than that used for the indication of any other rate1, specifying that this rate is subject to maintaining the deposit until its maturity.
3.1.2.5 If fees are attached to the term deposit, to indicate their existence.
3.1.2.6 To indicate, if applicable, the multiple nature of term deposits, specifying, if necessary, that each renewal entails the opening of a new account.
3.1.2.7 To specify the conditions of promotional offers (notably validity period, subscription conditions linked to the subscription of other products, subject to compliance with Article L. 312-1-2 of the Monetary and Financial Code).

3.2 On explanations provided to the depositor before concluding a contract concerning one or more term deposits:
To inform the depositor by communicating, before concluding a contract concerning one or more term deposits, a document distinct from the contract.
Offers comprising a single term deposit (not automatically renewable at maturity nor associated with another term deposit, savings product, or financial service), with a fixed interest rate and fixed early withdrawal penalties, may derogate from this provision. This document is not necessary where a pre-contractual information document provided for by legislation or regulation contains the information below.

This document clearly, visibly, and understandably exposes:
3.2.1 The nature of the product by clearly presenting term deposits as such without creating confusion with another savings product or financial service. When the term deposit is combined with other term deposits, savings products, or financial services, the general structure of the arrangement must be presented.
3.2.2 The financial conditions of the term deposit(s) composing the offer, specifying:
3.2.2.1 The duration of the contract until which it will mature.
3.2.2.2 The conditions, if any, under which the institution subordinates the granting of the offer and, in particular, the minimum required deposit amount and/or maximum authorized amount.
3.2.2.3 The characteristics of the interest rate applicable to the deposit, specifying each of the following points:
1 o Indication of the gross annual actuarial yield rate, before social and tax deductions, calculated over the total duration of the investment, for comparison purposes; 2 o When the exact rate cannot be determined, indication of the index or reference rate applicable to it as well as means to access it; 3 o Indication of the gross nature of this rate and its nature (fixed, progressive, variable), with indication, if applicable, of the index or reference rate and its application modalities.
3.2.2.4 The precise and detailed modalities for calculating interest as well as the date from which they accrue, indicating, if applicable, their capitalization and the periodicity of this capitalization. This information must be distinct from that relating to the calculation modalities of interest linked to any other associated products or financial services.
3.2.2.5 The payment modalities for interest, in particular if payment occurs during the contract and, in this case, the periodicity of interest payments, or if payment only occurs at maturity.
3.2.2.6 The modalities for the possible disposal of funds before the maturity date:
1 o By specifying the impact of the withdrawal on the remuneration of the term deposit and the penalties applied; 2 o By illustrating, in the form of a graph or table, the evolution, according to the withdrawal date and corresponding penalties, of the gross annual actuarial yield rate, before social and tax deductions. This graph or table is accompanied by an example to aid understanding. For term deposits whose remuneration rate is set at the time of subscription based on market conditions, the provisions of paragraph 3.2.2.6 may be implemented in the form of a supplementary sheet to the information document.
3.2.3 The conditions of any promotional offers, specifying their validity period, the duration of application of promotional conditions to the contract, and any conditions linked to the subscription or holding of other products or financial services, subject to compliance with the provisions of Article L.312-1-2 of the Monetary and Financial Code.
3.2.4 The operating modalities of the term deposit(s), specifying:
3.2.4.1 Those related to the initial payment and the restitution of funds (principal and interest) at the contract maturity and, in particular:
1 o The conditions for payment and restitution of funds by transfer, check, or any other means; 2 o The timeframes for fund payment upon closure of the term deposit account.
3.2.4.2 Their linkage with those of other associated products or financial services, if applicable, to the term deposit, notably the closure modalities of the entire arrangement and/or each element of the structure.
3.2.4.3 If applicable, the multiple nature of term deposits and the possibility to terminate the investment before opening a new term deposit account.

3.3 On periodic information of the depositor by the account keeper:
Regarding variable-rate contracts, to inform the depositor:
3.3.1 Of the updated status of their investment, periodically and adapted to the duration of the term deposit, in both cases of maintaining the term deposit until maturity and of early withdrawal of funds on the date of issuance of the document.
3.3.2 Within a timeframe adapted to the characteristics of the term deposit, of its renewal modalities and notably its right not to renew it as well as the consequences of its choice.

The entities must be able to justify to the Prudential Supervision and Resolution Authority the means and procedures implemented to ensure that the information communicated to the depositor allows them to understand the nature, financial conditions, and operating modalities of the marketed term deposits. This recommendation, as amended, is effective from its date of publication and applies to marketing acts subsequent to this date.